December 20, 2011 – Weekly Market Report

Fri, 23 Dec by Dale Russell

We have consistently pointed to the United States to predict our fortunes here in Alberta.  Lately we have heard a lot of negative news about the US economy, but it appears it is showing some surprising signs of strength lately.  Economic growth to the south is good for Alberta.  When their economy is moving, they buy large amounts of what we produce.  When their economy is moving, their dollar is stronger against ours and those things we sell them are more profitable.  Unfortunately, a stronger US dollar makes those trips to the warm south a little more expensive, but it’s

U.S. shows signs of recovery but outlook is still clouded, Barrie Mckenna, Globe and Mail – Dec. 18, 2011

Slowly and surely, the economic colossus is showing signs of recovery. On Thursday, the final estimate of third-quarter gross domestic product is due out, and it will likely confirm the economy is accelerating as the year comes to a close. Economists expect the economy expanded at a roughly two-per-cent clip, following gains of 1.3 per cent in the second quarter and 0.4 per cent in the first.

That’s all in the rearview mirror now. The consensus among economists is for even faster growth in Q4 – perhaps as high as high as 3 per cent.

For the first time in months, several key indicators are pointing in the right direction. Holiday spending is holding up well, exports are picking up, new jobless claims are steadily falling, the economy is adding jobs, consumer confidence is rising and housing is bottoming out.

“U.S.A., U.S.A. – it is interesting that all the talk is now about focusing back on the U.S.A.,” remarked David Rosenberg, the typically downbeat chief economist and strategist at Gluskin Sheff & Associates Inc. in Toronto.

But Mr. Rosenberg isn’t ready to pop the champagne. Dig into the data a bit deeper, and the bounce may not have much lift in 2012. Retailers are discounting like crazy to get shoppers to buy, consumer confidence is still in recession territory and while there are more jobs, wages are stagnating, he pointed out. And several key multinationals, such as Dupont and 3M, are warning of weaker sales in the months ahead.

The “clouded outlook” will force consumers and businesses to save more of every dollar they earn, particularly if Barack Obama is returned to the White House and a big tax grab follows in 2013, according to Mr. Rosenberg.  “Barring a pickup in income growth, rising savings rates will come at the expense of spending, which is what GDP is all about,” he said.

Most economists don’t expect U.S. growth to break through 2 per cent in any quarter of 2012.  “The U.S. economy faces a challenging backdrop fraught with risks,” according to a 2012 forecast by RBC Dominion Securities Inc.

The key, RBC argues, isn’t the American consumer. Capital expenditures and exports are likely to be the main drivers of the economy, exposing the United States to what is beyond its borders, including a predicted recession in Europe and an Asian slowdown.

December 14, 2011 – Weekly Market Report

Fri, 16 Dec by Dale Russell

Only in Alberta – Imagine!  Provincial employment in Alberta is up 97,000 jobs in the last 12 months!  The impact that is having on our economy is visible in our local housing market as demand for rentals is up, vacancies are down and the housing inventory is shrinking.

It’s too early to be predicting much in the way of price increases, but it appears that the market is definitely stabilizing and demand is the strongest it’s been in years.  The reason we aren’t predicting price inflation is that builders and developers appear well prepared to quickly add to the supply of homes, thus keeping supply and demand in balance.

Balanced Job Market – by Todd Hirsch, Senior Economist – Alberta Treasury Branch

The last official jobs report of 2011 disappointed on the national front, but in Alberta the news was once again quite encouraging.

For the seventh consecutive month, Alberta saw an increase in total employment, rising by 4,500 jobs. Compared to twelve months ago, provincial employment is up by over 97,000 (+4.8%). Alberta’s unemployment rate fell to 5.0%—the lowest in the country, and close to the point generally considered a balanced job market.

Canada’s national job market, on the other hand, unexpectedly shed 18,600 jobs in November. That was opposite the expected gain of about 12,000. Job losses were concentrated in Quebec and Saskatchewan. The national unemployment rate edged higher to 7.4% in November, up from 7.3% in October.

Even better news for Alberta, there was a strong shift towards full-time work (+9,100), while part-time positions actually fell (-4,600). Strong gains in oil and gas (+8,900) and other services (+11,600) were partially offset by losses in trade (-8,400) and manufacturing (-8,000).

While Alberta continues to buck the national trend in the jobs market, the pace of provincial job creation over the past several months has slowed. With the rate of unemployment being balanced—and increasing worry mounting in the global economy (see Economically Speaking)—Alberta is likely to see some moderation in employment growth in 2012.

But even with slower job creation, the province’s labour market will remain in enviably good shape.

December 8, 2011 – Weekly Market Update

Thu, 08 Dec by Dale Russell

Market Update

Lacombe – Year to date sales are up 7.4% over the same period last year.  Listings are also slightly higher as well and the ratio of sales to active listings is currently 17% representing a market where the buyer has the advantage.

Ponoka – Year to date sales are up 34.6% over the same period in 2010.  Active listings are about the same as they were a year ago.  The sales to active listings ratio is 21% which still represents a buyer’s market but is rapidly approaching balance.

Blackfalds – Year to date sales are up 27.7% over the same period last year.  Active listings at Dec. 1, 2011 are down slightly from Dec. 2010.  The December sales to active listings ratio was 11.2% – still a buyer’s market.

Sylvan Lake – Year to date sales are up 1.9% over the same period last year.  Active listings as of Dec. 1, 2011 are slightly lower than the same time in 2010 and the sales to active listing ratio at 8.3% suggests the Sylvan Lake market still heavily favours buyers.

Red Deer – Year to date sales are up 15% over the same period last year.  Active listings as of Dec 1 this year are down a whopping 53% over Dec. 1, 2010.  December sales to active listing ratio was 30% – well into balanced market territory and closing in on a seller’s market.

Central Alberta – Year to date sales are up 20.5% over the same period last year.  Active listings as of Dec. 1 this year are down very slightly from Dec. 2010.  December sales to active listing ratio was 8.75% – overall, still a market where the buyer has the advantage.

Summary – There are definite signs that the real estate market in central Alberta is coming out of the doldrums we’ve been experiencing for the last 3 years.  Red Deer is the first to reach balanced market conditions, but if economic conditions remain constant over the next few months, the rest of our markets will soon catch up and even trend toward seller’s market territory, where the sales to active listings ratio is higher than 30%.  That means just 3 houses available for every buyer instead of the 10 or more we’ve experienced since 2008.

The reasons for our improving market are quite simple.  Oil prices continue to hover around $100 and drilling activity is up 41% over last year.  Alberta’s economy is once again leading the provinces with 3% GDP growth this year.  A strong economy generates jobs and jobs entice people to move to Alberta.  More than 25,000 people migrated to Alberta from other countries in 2010 and interprovincial migration is back in positive territory (forecasted at 10,000 for 2011).

Population growth creates demand for housing.  The first indication of strengthening comes in the rental market since many of those folks moving here are not in a position to buy homes.  The vacancy rate in Red Deer is now estimated to be about 1%.

There are caveats on this forecast.  87.5% of Alberta’s exports go to the U.S.  Our fortunes are tied tightly to the U.S. economy.  We are hearing encouraging reports from south of the border, but the improvement is slow and gradual which will temper our growth.  We are predicting balanced market conditions for 2012 in central Alberta but don’t expect much in the way of price inflation.

December 1, 2011 – Weekly Market Update

Mon, 05 Dec by Dale Russell

Market UpdateUnemployment is down and the real estate market is benefitting.  Sales this month compared to last year are up and higher employment rates are a contributing factor.

The article below suggests that some industries in Alberta are facing worker shortages.  We should expect those job openings to entice people to move to Alberta which will drive more demand for housing.  The rental market is already straining to handle demand and it’s only a matter of time before the resale and new home markets improve as well.

Jobless Rate by Industry – Todd Hirsch, Senior Economist, ATB Financial

The number of people looking for work in Alberta has fallen over the past year. However, the chances of finding work vary by industry—and some sectors are already seeing some serious labour shortages.

Alberta’s overall unemployment rate has fallen from an average of 6.7% during the first three quarters of 2010, to 5.6% in the same period of 2011. The rate was as low as 3.2% in June 2008, and peaked at 7.6% in April 2010.

Unemployment rates by sector vary considerably. The graph below shows major sectors of the job market, and how the rate of joblessness has changed between January-September of 2010 to the same period this year. (Due to space constraints, only major sectors are presented).

The sector with the lowest rate of unemployment in 2011 is health care and social assistance, at only 2.7%. Interestingly, that is the only sector in which the rate has risen this year (up from 2.1% in 2010). In both 2011 and 2010, the sector is experiencing labour shortages.

Workers in professional, scientific and technical services (3.0% unemployment) and mining and oil & gas (3.1%) are also in short supply.

The major sector with the highest rate of unemployment is the construction sector, at 6.9%. However, that is much lower than the 8.4% recorded last year. It’s also lower than Canada’s overall unemployment rate of 7.3%.